Blog Post

With GST one of the biggest change in habit would be that accounts need to be maintained regularly on a daily basis and the pressure on compliance would then become much lesser because then it becomes a normal activity. If the accounts are not being maintained regularly then it could end up being a high stress activity.

If you look at the number of compliances, the number of reports that a company needs to regularly file- there are primarily three reports GSTR- 1, GSTR- 2 and GSTR-3. The first return is due on 10th of every month after which you will need to reconcile what everyone else has filed about you by the 15th of every month. Then there is an interim date of 17th when whatever you have not reported till now comes back to you. This you do every month. After that your GSTR- 3, your tax liability and return will be generated which you need to pay.

However, it is absolutely important to note that you pay the amount due as tax every month. The payment is necessary before the return is considered a valid return. So you cannot file the return and say, “I will pay later.”

I think one of the thing which every business needs to do is recognize the compliance needs of their business, ensure how much input is available to them, what they need to do to ensure that input is available and not fully rely on their accountant to keep their books. Every business would definitely need to maintain GST accounting software because the construct of GST is such that you cannot do your filings manually. You will need to have software, even if it is Excel, but a technology solution is needed.

What I recommend is small businesses above the threshold of Rs 20 lakh should get family members and friends to help out with the accounting. Any educated, non-working family member can be trained to help out with the compliances. This would mean the management has more time to spend on actual business and the time on compliance goes down.

Dealing with change

When it comes to change, it is not merely limited to your books of accounts. With GST, I would like to point out one potential behavioral change that we see arising out of this compliance need. Let us say I am a trader I am buying certain goods from A. What I would need A to do is that he pays his taxes and communicates with the government that, “Yes, this is my liability.”

At this stage there are two check points that we can use. If I know A is sufficiently solvent and he would pay his taxes then I would wait for him to file his GSTR-1 and when I see my transaction appearing correctly in my GSTR-2A ,that is when I will want to pay him.

If I am not sure that he is sufficiently solvent, then I will wait for his GSTR-3 to be filed, ensure that he has paid the taxes on what he has sold to me and then want to pay him. We are likely to see a situation like this cascading across the ecosystem, which would basically increase the working capital cycles and increase the bargaining power of relatively compliant suppliers.

I would always want buy from a compliant supplier, and if there is a smaller supplier whose credentials I am not very sure about, I will extend my payment terms such that till I am sure my credit is available. I can also pay A partially and not pay him the tax component of my invoice. However, these fixes will mean credit availability for a business will increase and add another layer of operations.

This article written by Manish Chowdhary, CEO, Tally Education,a subsidiary of Tally Solutions Pvt. Ltd. was originally published in The Economic Times